In early November 2008, I held an “all hands” meeting for all of the executives in our portfolio.  At the time, we had 12 active investments and 3 passive investments.  The message that LaunchCapital was delivering was simple and clear: the financial crisis will drastically affect your fund raising efforts.  In order to make it through the downturn, focus on two things: 1) the most important metrics to validate your business model  2) core revenue and new revenue models.

Many of our portfolio companies took this message to heart.  On the far end of the spectrum was Lawrence Coburn and Mathew Spolin, CEO and CTO of RateitAll.  This duo went as far as to have an offsite meeting in which they invited CEOs and advisers from other start-ups to talk about (among other things) varying revenue models.  The CEOs were invited to help generate ideas on how to maximize user experience, site value and revenue generation.  Following the meeting, the RateitAll team went to work implementing a number of new concepts and ideas.  Last Saturday morning, I woke up to a September update in which their monthly was up more than 85% from plan (a plan that was developed before the financial crisis hit).  This was a wonderful surprise coming from a business that is primarily an ad-based revenue model (in an environment where online advertising spend is declining month over month).

Lawrence and Mathew are the kind of entrepreneurs that LaunchCapital loves to back.  They are relentless in their pursuit for new ways to generate revenue and to get to cash flow break even.  They are not scared to take calculated risks.  And, they know exactly which metrics to focus on.

In the last 12 months, it has become easy for businesses (both start ups and established companies) to utilize the terrible macroeconomic environment as a reason for missed metrics.  However, there are always a few creative companies that are able to modify their business strategy and business model to capitalize on the changing market conditions.  The companies in our portfolio who were able to do this focused hard on driving customer traction to achieve revenue and financial stability.  Today, these companies are in a great position to maximize on an economic environment that is rebounding.  With solid metrics behind them, these companies are now signing strategic partnerships, entertaining liquidity options and drawing additional growth capital.

Ultimately, we all have learned a lot from this economic downturn.  Personally, I now have a deeper appreciation for the tenacity of entrepreneurs and have learned that the greatest innovation for many companies may not be in the product itself, but in the underlying business models that drive success: customer acquisition, revenue and costs.

How have you leveraged your existing customer base, strategic partners and/or business model to generate extra revenue streams in the down economy?

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